Copper scrap consumption dips in Jan on weaker price advantage, CNY closure

SHANGHAI, Mar 7 (SMM) – China's consumption of copper scrap continued to fall in January as falling prices of copper futures lowered price advantage of scrap materials, and downstream consumers closed for CNY, an SMM research found.  

China's copper smelters and processors consumed some 177,700 mt of copper scrap in January, down 23,300 mt, or 11.6% from December. Consumption from both processors and smelters shrank on the month. 

A falling market in January withheld spot copper sellers from destocking, and also depressed trades in the scrap copper market. The price spread between scrap, futures remained below 1,000 yuan/mt in January, with the lowest level at 361 yuan/mt, reflecting poor price advantages of copper scrap. 

Copper smelters turned to alternatives such as seaborne blister copper. This saw higher imports of blister copper in January, at 86,400 mt, up 22% from a year earlier, customs data showed. 

Domestic smelters consumed some 96,400 mt of copper scrap in January, down 6,200 mt on the month. Last year, stricter environmental policies drove a lot of secondary smelters to close, and this also weighed on the use of copper scrap in January. 

SMM data showed that domestic processors consumed some 45.7% of the overall copper scrap, or 81,300 mt, in January, down 17,100 mt from December. Operating rates across scrap-using rod producers declined 4.52 percentage points from December, to 50.31% in January. 

Consumption of copper scrap in February will dip further as processors and smelters closed for CNY. 

As of Thursday March 7, downstream demand for copper scrap recovered, with brisk trades heard in markets of Guangdong, Jiangxi, and Henan where most copper rod producers locate. Copper prices rebounded after CNY, and drove consumers to cheap scrap materials, SMM learned. 

Spread between copper scrap, futures prices expanded and remained at some 1,500 yuan/mt in the post-CNY period to March 7.